Report on Managing Financial Resources and Decision Making

This report provides a comprehensive overview of managing financial resources and decision-making for a business. It begins by exploring various funding sources, including winning contests, government grants, business accelerators, and microfinance loans, evaluating their advantages and disadvantages. The report then delves into financial planning, emphasizing the importance of determining capital structure and outlining the objectives of financial planning. It discusses the role of financial information and identifies both internal and external decision-makers who utilize this information, such as management, employees, creditors, and financiers. Finally, the report examines financial statements, including the balance sheet and profit and loss statements, illustrating how financial data is recorded and analyzed to assess business performance and make informed decisions.

MANAGING FINANCIAL
RESOURCES
AND
DECISION

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1...........................................................................................................................................1
1.2...........................................................................................................................................2
1.3...........................................................................................................................................3
2.1...........................................................................................................................................4
2.2...........................................................................................................................................5
2.3...........................................................................................................................................5
2.4...........................................................................................................................................6
3.1...........................................................................................................................................8
3.2...........................................................................................................................................9
3.3.........................................................................................................................................10
TASK 2..........................................................................................................................................12
4.1.........................................................................................................................................12
4.2.........................................................................................................................................12
4.3.........................................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

Index of Tables
Table 1: Evaluation of sources of finance........................................................................................3
Table 2: Extract of balance sheet.....................................................................................................7
Table 3: Extract of balance sheet.....................................................................................................7
Table 4: Extract of profit and loss statement...................................................................................7
Table 5: Receipt account..................................................................................................................7
Table 6: Extract of balance sheet.....................................................................................................8
Table 7: Extract of profit and loss account......................................................................................8
Table 8: Sales budget.......................................................................................................................8
Table 9: Production budget..............................................................................................................9
Table 10: Cash budget.....................................................................................................................9
Table 11: Calculation of cost.........................................................................................................10
Table 12: Calculation of selling price............................................................................................11
Table 13: calculation of cash flows...............................................................................................11
Table 14: payback period...............................................................................................................12
Table 15: NPV...............................................................................................................................12
Table 16: Ratios of Marriott international.....................................................................................14

INTRODUCTION
The complex structure of the business can be simplified by using various financial
resources to fund the requirement of the business. The role of financial matter has increases as its
demand has increases with the increasing scope of industry. This project is about defining
various methods to understand the worth of finance for an enterprise. The sources of finances
used in the project are according to an entrepreneur as they are starting their business on small
scale. It also uses various budgeting techniques to forecast the future requirement of cash and
other resources that are utilised in the firm. Ratio analysis is that technique which helps an
enterprise to determine their financial performance.
TASK 1
1.1
 Winning contest- It is uniq1ue an entrepreneur can adopt in order to fund their business
with less amount of business risk (Jorgensen and Rotter, 2016). In this approach an
entrepreneur can participate in various business contests where the basic requirement of
contestant is to prepare product or business plan to show their ability and earn money by
winning the contest. The innovation and creativity of a person will also recognise by the
judges which provides a name to an entrepreneur in front of other peoples.
 Govt. programs- The UK Government support new start up that is the reason they
launched different schemes and programs to promote the new entrepreneur. They can be
encouraged by providing financial support as the enthusiasm of an entrepreneur to bring
out their inner potential (Ehrhardt and Brigham, 2016). The grants provided by
government have no legal consequences to repay within a certain time duration.
 Business accelerators- Early stage start ups are also regarded as incubators and
accelerator programs provided existing business enterprise as a funding option to them.
The knowledge power and existing skills and capabilities of existing businesses are
utilised by new comers to enter into new estate. Funding is given by existing industry
experts to all those persons who wish to enter in the dominant business world.
 Loan from Micro finance- It is beneficial method for new comers as they can get loan
from non banking financial corporations which is alternative of bank loan (Hosain, 2016).
1

It is easy way of funding as there is no complex legal terms and definitions like a normal
bank.
1.2
Winning contests
Positive factors
 It is easy way to fund the financial business requirement without taking money from
anywhere.
 It beings lot of opportunities to make connections with industry experts as this event
organised by big fore organization.
Negative factors
There is high amount of risks as the money will be given only in case of winning the contests.
Government programs
Advantages
 Heavy investment as initial investment can be applied in the business.
 The talent of a person will bring out with the ultimate support given by the legal
authority.
Disadvantages
 Change in governmental structure or political stability will be proved against the person.
 High taxation burden can be imposed on new start-up by opening a business with heavy
amount of investment.
Business accelerator
Positive factors
 The financing requirement fulfilled by business experts exists in the same industry.
 The accelerators are act as a parent which nurtures the ability of their child.
 Funding coupled with the training and guidance provided by business to a person.
2

Negative factors
 It requires time commitment for business owners to support the individual
 Lack of time will not initiate this kind of business funding option.
Loan from Micro-finance
Positive aspects
 It has no legal obligation and rigid terms and conditions to repay amount in specific
period.
 It facilitates the lender with small bundles of investment to fund their business.
Negative factors
 Taking small investments will not complete the objective of the enterprise.
 It wastes lot of time as the overall objective of the business gets delay by taking small
bundle of investment.
1.3
Table 1: Evaluation of sources of finance
Criteria Winning contests Government
grants
Business
accelerator
Loan from Micro
finance
Cost involved The participation
fee is the basic
cost involved in
getting the fund
in form of
winning the
contests
Legal fees are the
basic obligation
required in this
approach as he
entrepreneur
should fill out the
application forms
with the
government by
submitting
relevant
Cost of searching
appropriate
business
incubators to
source the
business project
and provide time
commitment to
support theirs
idea.
It lends applicants
on the basis of
specific
qualification
criteria which can
be of different
types such as
application form
fee, appointment
fee and other fees.
3

documents to be
shortlisted among
various
applicants.
Risks No funding in
case of losing the
contest.
Changes in
programs will not
prove beneficial
for a person.
Wrong actions
and bad
experience of
business experts
will create trouble
for a person.
Lack of meeting
one of the criteria
of this
corporation will
result into no
funding.
From the above evaluation of four sources of finance on the basis of different criteria, it
has been observed that an entrepreneur should consider three from the four given above sources.
It is clear that winning contests as sources of funding is very risky option for newcomer as the
losing of contest will waste the time and energy of a person.
2.1
Winning contests- Cost factor is the basic element which needs to be consider while selecting
any sources of finance (Parker and Swanson, 2016). This approach is right as the entrepreneur
will fund their business requirement by earning money and also get couple of service attached
with it. The basic costs involved in choosing this kind of option is the participation fee in form of
registration fee. It also involves several rounds fee if selected in big contests.
Government grants- The government of UK established several commits to n monitors the
progress of these grants given by them in order to encourage new start-ups. The request fee and
legal attestation fee is been paid by the candidate in initial stage. The start-up capital is funded by
authority but the renewal costs and all other costs involved in later stages are to be paid by the
start-ups.
Business accelerators- The cost of finding the best suitable candidate to fund their business
requirements Fletcher, 2016). It also involves social cost that is the time invested by the owners
4

in the idea germination process and developing the initial entity. The adequate support of these
experts to uplift the level of these initial business owners.
Loan from micro finance- It is different from bank which requires legal terms and conditions
by imposing complex structure. The costs involved in opting this kind of source is funding cost,
stationery expenses, criteria used to fund the business requirement by using various components
of funding such as asset financing and many more.
2.2
Financial planning is a process of estimating future capital requirement by considering
the present facts and figures that reflects the internal efficiency of a firm (Kostova and Nell,
2016). It helps to determine the capital required by the enterprise in relation to the external
competition. It is a systematic programme of framing financial policies in relation to
procurement, investment and administration of funds of an enterprise. There are different
objectives of financial planning which is helpful for an entity by identifying their aims to move
in a defined direction.
Determining capital structure- It is a composition of various financial components that form a
perfect capital structure which consists of different elements such as equity, debt and preference
shares (Hira, 2016). The sources can be varied from short term and long term sources as this
decision is based on debt and equity ratio to ascertain the proportion of two things.
Importance of financial planning
 It helps to frame different objectives, policies, procedures and programmes as per their
specific nature.
 The adequate funds requirements are properly balanced by taking resources in specific
proportion to meet the demands of the business.
 This financial plan will help to create perfect balance cash inflow and cash outflow as
this stability should be maintained to ensure the business performance.
 It helps in reducing the future uncertainties with regards to changing market conditions in
order to adapt with dynamic business environment.
 It acts as mirror which reflects the external market tends and patterns in relation to the
internal capabilities.
5

2.3
Financial information is that which reflects the efficiency of an enterprise to meet tall the
financial objectives of the business (Fletcher, 2016). This information are conveyed with
different kinds of decision makers by preparation standard forms of financial statements. There
are two different kinds of financial decision makers just like internal and external decision
makers.
Internal users are also known as primary users who make decisions on the internal business
proceedings and influence the functioning of an entity at different point of time.
Management- The major concern of this is to consider all the information of internal and
external matter which increases or decreases the overall cost (DaDalt and Coughlin, 2016). It
utilises the financial information for analysing the organisational performance by taking
appropriate steps to improve the existing ability.
Employees-The business efficiency will increase the salary and interest of personnel in the
enterprise is the major concern of employees in determining the financial performance of the
entity.
External users
Creditors- The credit worthiness will determine the efficiency of an organisation to take as
much credit from outside the business by paying all the obligations within the time attracts wide
number of trade creditors. This credibility of an organisation is an assessment of overall business
health to handle all kind of situations.
Financiers- the money invest by the investors in the business are attracted in strong financial
position of the entity which creates higher benefits and returns in-near future (Evans and Porter,
2010). The feasibility study report prepared by the firm circulates in their investors to observe
increasing or decreasing pattern of their equity invested in a business as commitment.
2.4
The standards form of financial statements are profit and loss statements and balance
sheet as there are the major concern of an entity.
Winning contest- The amount generated from these contests are used as capital which is
invested in form of share capital to meet all kind of expenses (Hira, 2016). This form of capital is
6

to be recorded in balance sheet as share capital as the basic equity invested in form of cash or
cheque will reflect the business efficiency.
Table 2: Extract of balance sheet
Equity and liabilities Amount
Share capital XXXX
The above sources of finance earned from this source will not be taken into account as this
should be recorded only in balance sheet and not in profit and loss account statements as it is
initial investment.
Government grants- Grants provided by government should be taken as share capital to be
invested in the business will only select in balance sheet to ascertain the financial
position(Fletcher, 2016). The rules and regulations are to be met by the owner in form of grants
received in profit and loss account. It will also have to prepared receipt and payment account.
Table 3: Extract of balance sheet
Equity and liabilities Amount
Share capital XXXX
Table 4: Extract of profit and loss statement
Particulars Amount
Grants received XXXX
Table 5: Receipt account
Particulars Amount
Grants received
Business accelerators- The amount given by the business experts have no involvement in the
profit and loss account as the capital given by them is not affect the profitability of an enterprise.
7

The amount of capital is to be treated as owner's capital in the balance sheet which contributed in
ascertaining the position of enterprise in financial context.
Loan from micro-finance- The amount taken as loan is always shown in balance sheet as it is
liability on firm. It also affects the profitability by paying the interest of the loan taken from the
financial institutions.
Table 6: Extract of balance sheet
Equity and liabilities Amount
Non current liability
Bank loan XXXX
Table 7: Extract of profit and loss account
Particulars Amount
Interest paid XXXX
3.1
Table 8: Sales budget
Particulars Jan Feb March April May June
Forecasted sales units 964 1304 1278 1331 1398 1460
Price per unit 100 100 100 100 100 100
Total gross sales 96400 130400 127800 133100 139800 146000
Less: Sales discount &
allowances 10000 12000 14000 16000 18000 20000
Total net sales 86400 118400 113800 117100 121800 126000
Interpretations
8

The above mentioned sales forecasted budget has been prepared in order to identify the
sales and revenue generated by an enterprise from different sources of incomes. The sales units
are gradually increases from one moth to the next month at same time sales discounts are also
increases with a fixed value of 2000 every month.
Table 9: Production budget
Particulars Jan Feb March April May June
Forecasted sales units 964 1304 1278 1331 1398 1460
Add: Planned ending inventory 2000 2000 2000 2000 2000 2000
Total production required 2964 3304 3278 3331 3398 3460
Less: Beginning finished
goods inventory 1000 500 600 800 1000 1200
units to be manufactured 1964 2804 2678 2531 2398 2260
Interpretations
Production budget is another budget prepared after preparation of sales units which forms
basis in order to identify forecasted units to be manufactured. The units to be manufactured are
also gradually increases as it is totally increases with the changes takes place in sales units.
Table 10: Cash budget
Particulars Jan Feb March April May June
Initial cash 20000
Loan from micro finance 180000
Income from online sales 35000 40000 35000 38000 41000 42000
Income from in-store sales 22400 56400 56800 57100 58800 62000
9